BoJ stands pat on policy
The Bank of Japan (BoJ) has maintained its massive asset-buying programme but offered a bleaker view on factory output, following signs that the world’s third-largest economy was hit harder than expected by a sales tax increase in April.
Policymakers stuck to their view that the economy will resume a moderate recovery and achieve the bank’s 2% inflation target next year without more monetary easing, but also acknowledged that weak consumer spending is hurting output and business sentiment.
BoJ governor Haruhiko Kuroda maintained that optimism yesterday, telling parliament that a positive economic cycle remained in place, with households and companies increasing spending as they see incomes rising.
But he warned of potential risks to growth and stressed anew that the central bank was ready to ease monetary policy further if the economy and prices undershoot its forecast.
“It’s true the effect (of the sales tax hike) on the economy is being prolonged. There’s also the effect of bad summer weather,” Kuroda told parliament.
The BoJ’s policy meeting yesterday was interrupted because Kuroda was summoned to speak in parliament, a rare event that last happened in September 1998.
An intense burst of monetary and fiscal stimulus, which were the first two “arrows” of Prime Minister Shinzo Abe’s strategy to end 15 years of deflation, has helped boost business sentiment by lifting share prices and weakening the yen.
But his growth strategy to boost Japan’s long-term economic potential, dubbed the third arrow of “Abenomics,” has disappointed markets and, along with a spate of weak data, has cast doubts on the success of reviving the economy on a sustained basis. — Reuters